Check my work Required information [The following information applies to the que
ID: 2517150 • Letter: C
Question
Check my work Required information [The following information applies to the questions displayed below.) After several profitable years running her business, Ingrid decided to acquire the assets of a small competing business. On May 1 of year 1, Ingrid acquired the competing business for $354,000. Ingrid allocated $59,000 of the purchase price to goodwill. Ingrid's business reports its taxable income on a calendar-year basis. (Do not round intermediate calculations. Round your answers to the nearest whole dollar amount.) a. How much amortization expense on the goodwill can Ingrid deduct in year 1, year 2, and year 3? Deductible amortization expense Year 1 Year 2 Year 3Explanation / Answer
a. Deductible Amortization Expense Year 1 $ 2,622 Year 2 $ 3,933 Year 3 $ 3,933 Workings Description Amount Explaination 1 Basis of Goodwill $ 59,000 Given 2 Recovery Period ( months i.e 12 X 15 years = 180 ) 180 15 years 3 Monthly Amortization $ 328 ( 1 )/ ( 2 ) 4 Months in Year 1 8 May to December 5 Year 1 straight line amortization $ 2,622 ( 3 ) X ( 4 ) 6 Months in Year 2 and 3 12 January to December 7 Year 2 and 3 annual straight line amortization $ 3,933 ( 3 ) X ( 6 ) b. Phone List Year 1 Amortization Expense $ 1,933 Year 2 Amortization Expense $ 2,900 Year 3 Amortization Expense $ 2,900 Workings Description Amount Explaination 1 Basis of Phone List $ 14,500 Given 2 Recovery period in months ( 12 X 5 years = 60 ) 60 5 years 3 Monthly Amortization $ 242 ( 1 )/ ( 2 ) 4 Months in Year 1 8 May to December 5 Year 1 straight line amortization $ 1,933 ( 3 ) X ( 4 ) 6 Months in Year 2 and 3 12 January to December 7 Year 2 and 3 annual straight line amortization $ 2,900 ( 3 ) X ( 6 )
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